US-China Trade Wars: A Challenge for the New Government?
The ongoing trade skirmish between the US and China is showing no signs of abating with the US increasing tariffs from 10% to 25% on $200 billion worth of Chinese products on 10 May 2019. China in retaliation has said that it will raise tariffs on $60 billion worth US imports beginning 1 June 2019. China has already imposed tariffs on US products worth $110 billion last year. The worsening economic indicators in the US, like student loan delinquency and yield curve inversion, may pose challenges for the incumbent Indian government as well, says a research note.
 
In the report, Dr Soumya Kanti Ghosh, group chief economic adviser of State Bank of India (SBI), says, "Not just China, the US is waging tariff war with other countries, with tariffs imposed on its major trade partners Canada, Mexico and others as US is convinced that it has to reduce its burgeoning trade deficit.
 
Interestingly, we find that the impact of such tariffs may be hurting US more and hence that country may be caught in a vicious cycle of imposing more tariffs as a veiled threat of not retaliating."
 
 
US President Trump has created a lot of noise on the trade front, since he joined office, with the language of the various trade related documents making it amply clear that US has felt itself to be handed the short end of the stick by its trade partners. It began with the 2017 US Trade Policy Agenda outlining the new administration’s four trade priorities: promoting US sovereignty, enforcing US trade laws, leveraging American economic strength to expand their goods and services exports, and protecting US intellectual property rights. 
 
Since then the US has renegotiated the North American Free Trade Agreement (NAFTA) with Canada and Mexico and the US Korea (KORUS) free trade agreement. It has imposed tariffs on imported steel and aluminium, which have invoked retaliation from its trade partners.
 
"With all the hullabaloo created over President Trump’s trade measures, we looked at US’ trade deficit and found that its goods trade deficit has in fact increased in 2018, with imports growing more than exports. A strengthening US economy and strong dollar have supported the imports, despite the hue and cry raised by President Trump on the trade deficit," Dr Ghosh from SBI added.
 
On an annual basis, in the end use commodity category, foods, feeds, beverages exports has seen the slowest growth. More than 800 food and agricultural products from the US have been subject to retaliatory tariffs from China, the EU, Turkey, Canada, and Mexico. This could be reason for the slowing exports growth of agricultural products. With nearly 20% of farm income derived from exports, the trade war will impact the US farmers to a considerable extent, SBI says.
 
For example, Dr Ghosh says, Chinese data shows that the monthly growth of imports from US has declined more as compared to Chinese exports to US after July 2018. Although, China will be impacted more as the base of its exports to US is much larger than its imports, it appears that US is not going to remain unscathed, he added.
 
 
The report also points out the large difference between the official trade statistics released by the US and People’s Republic of China. However, as the latest data is available in the Chinese General Administration of Customs, SBI found that in absolute terms Chinese exports to the US have gone down to $31.4 billion in April 2019 from $36.1 billion in April 2018. Meanwhile Chinese imports from US have declined to $10.3 billion in April this year from $13.9 billion in same period a year ago.
 
In addition, SBI says, there are even concerns about the tariff wars spilling over to the financial markets in the form of China cutting short its exposure in US treasury market. China owns $1.13 trillion in treasury, a fraction of the total $22 trillion in US debt outstanding but 17.7% of the various securities held by foreign governments, according to data from the treasury and the Securities Industry and Financial Markets Association.
 
With 25% tariffs on $250 billion worth of Chinese goods, the US can generate revenue to the tune of $62.5 billion annually. "Will this be sufficient to compensate for the loss incurred by the American consumers and exporters and more importantly the harm caused to the China-US relations? A recent survey by Pew Research Centre has found that American public is more positive about free trade agreements and sceptical about tariffs. With the upcoming elections, it would not be amiss for the US President to take into account sound economic principles and people’s mandate," Dr Ghosh from SBI concludes.
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    US raises tariffs on Chinese goods worth $200bn
    The US on Friday has more than doubled tariffs on $200 billion worth of Chinese products from 10 per cent to 25 per cent, in a sharp escalation of their damaging trade war, the Chinese government has confirmed.
     
    "The US has raised the tariff on $200 billion of Chinese exports to the US from 10 per cent to 25 per cent," China's Commerce Ministry said on its website.
     
    "It is hoped that the US and the Chinese side will work together... to resolve existing problems through cooperation and consultation."
     
    Meanwhile, a Chinese delegation who is currently in Washington for the 11th round of high-level economic and trade consultations with American officials, said that Beijing "deeply regrets" that the US has increased the additional tariffs, Xinhua news agency reported.
     
    China will have to take necessary countermeasures, the delegation, led by Vice Premier Liu He, said.
     
    With this round of talks still ongoing, Beijing hopes that the US can meet China halfway, and that the two sides will make joint efforts to resolve existing problems through cooperation and consultation, it added.
     
    Chinese stock markets were little changed after the tariffs came into force, with the Hang Seng index trading up 0.6 per cent and the Shanghai Composite 1.5 per cent higher.
     
    The tariffs come after US President Donald Trump on Sunday threatened to raise tariffs on $200 billion of Chinese goods. 
     
    The American and Chinese negotiators met on Thursday evening but failed to produce an agreement to forestall the higher levies and to end a tit-for-tat trade war.
     
    However, the White House said talks would continue on Friday, said The New York Times.
     
    "This evening, Ambassador (Robert E.) Lightizer and Secretary (Steve) Mnuchin met with President Trump to discuss the ongoing trade negotiations with China. The Ambassador and Secretary then had a working dinner with Vice Premier Liu He, and agreed to continue discussions," it added.
     
    The 10 per cent duties on $200 billion worth of Chinese products - including fish, handbags, clothing and footwear - were due to rise at the start of the year, but it was delayed as negotiations advanced since agreeing on a truce last December.
     
    Before the trade talks began on Thursday evening, Trump earlier in the day said that he had received a "beautiful letter" from Chinese counterpart Xi Jinping and that they would probably speak by phone.
     
    Both sides have already imposed tariffs on billions of dollars worth of one another's goods, the BBC reported.
     
    Last year, the US slapped duties on $250 billion worth of Chinese goods and China levelled duties on $110 billion of US products.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
     
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    Political advertising on Facebook creating 'inequalities'
    As more and more political parties advertise on Facebook to reach out to maximum number of voters, the practice is creating new types of inequalities for campaigners and, in turn, posing new set of challenges for the regulators, warn researchers.
     
    Traditional campaigning regulations are based on the theory that spending by each political party leads to a similar result.
     
    For example, if political parties spent the same amount on leaflets, the literature would reach a similar number of people.
     
    However, this cannot apply to Facebook advertising where the impact is dependent on the audience the advertiser wants to reach, argues Katharine Dommett from the University of Sheffield and Sam Power from the University of Exeter.
     
    "This means different spend will have different results. Adverts in a marginal constituency will be more expensive, as will adverts that are directed at an audience that is in high demand from advertisers," the researchers said in a paper published in the journal Political Quarterly.
     
    For example, in India, even before elections were announced, in February itself, Facebook had run over 51,000 political ads in India worth more than Rs 10 crore and Google declared 800 ads bought for Rs 3.6 crore.
     
    "As digital political campaigning grows, it is now increasingly difficult for existing regulators to capture the true extent of what is happening online, let alone whether these practices violate democratic norms," suggested Dommett.
     
    The unreliability of existing data on the use of Facebook needs to be acknowledged by regulators if campaigning spending is to be effectively interpreted and understood.
     
    The findings showed that regulation must also take into account how Facebook algorithms mean the same advertising spend has different results.
     
    "Although Facebook has introduced some new transparency measures, nobody can fully monitor both how it is being used by political parties and the inequalities of access they can face," said Power.
     
    It is also not Facebook's role to regulate elections.
     
    "We need to recognise these limitations to think about whether and how existing reporting requirements need to change," Power added.
     
    Regulators around the world need to think about how to monitor and respond to spending principles that are creating inequalities in the electoral market place.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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